Incorporated banks under companies act, Auditing

Incorporated Banks under Companies Act

Banks are incorporated under the Companies Act like any other business but are granted special privileges under the same Companies Act and subjected to very strict controls by the Central Bank of US. Apart from frequent visits from the Central Bank and regular reports to the Central Bank on liquidity levels the auditor is also required to submit a copy of his audit report to the Central Bank. The auditor should review the reports submitted to the Central Bank and the reports submitted to the bank by the Central Bank as a result of the visits. The auditor is also concerned with enquiring into compliance with the Banking Act. In theory, banks are allowed to set up secret reserves by writing down assets or creating excessive provisions without disclosing that they have done so. The effect of this is:

(a)The real position may be better than that disclosed but never worse.

(b)In good years, secret reserves are created and in bad years they are run down. The effect of this is to even out the profits and the customers are not then tempted to withdraw their deposits if the bank has a bad year.

If the bank was to take advantage of these provisions then it would not be possible for the auditor to give a true and fair view report on the accounts. In practice banks in US do not take advantage of the provisions and therefore the auditor carries out a normal audit and gives a report in true and fair terms.

Posted Date: 1/28/2013 2:51:47 AM | Location : United States







Related Discussions:- Incorporated banks under companies act, Assignment Help, Ask Question on Incorporated banks under companies act, Get Answer, Expert's Help, Incorporated banks under companies act Discussions

Write discussion on Incorporated banks under companies act
Your posts are moderated
Related Questions
Techniques of Obtaining Evidence ISA 500 mentions them as such: Inspection of documents or records, Inspection of tangible assets, Observation, Inq

Communication with Expert Whether the auditor intends to utilize the work of an expert then he must communicate along with the expert well in advance to confirm the terms of e

Beneficial Ownership or Title In January 1976 the famous case of Aluminium Industries vaassen B V v. Romalpa Aluminium Ltd radically altered the law along with regard to norma

Negligence in General There is no case against auditors and this made it hard to be accurate as to where the auditor’s legal liability falls.  We require therefore referring to

As an auditor, how would you react to the following situation? The company produced photocopies of fixed deposit receipts as the original receipts were kept in the iron safe of the

Goodwill and Business Combinations - Intangible Assets Goodwill is the one of most strange of all assets since it cannot be differentiate from the business.  It cannot be sold

Q. Which of the following statements is not considered a disadvantage of the corporate form of organization? a. Additional taxes b. Government regulations c. Limited liability of s

In June 2004, Feltex Carpets Limited raised NZ $254 million in an initial public offering. Twenty seven months later the company was in receivership, its share price having collaps

IFRS 5 Non-Current Assets IFRS 5 Non-Current Assets Held for Discontinued and Sale Operations The Discontinuing Operation is a component of an enterprise: (a)  Such the

Auditor Further point to note is which modern companies can be exclusively large along with multi-national activities.  So preparing accounts for that a group becomes a widely